Talk of bank reform stings Wright Express
Shares of Wright Express Corp. have fallen 11.4% today after an analyst downgraded the company's rating over fears of how new proposed banking regulations could affect its long-term profitability.
A proposal put forth by the Treasury Department last week would force all companies owning a subsidiary that provides banking services -- Wright Express owns Wright Express Financial Services Corp. -- to convert to a bank holding company or lose protection through the Federal Deposit Insurance Corp., according to StreetInsider.com. The proposal was a single line within the Treasury Department's 89-page white paper on financial regulatory reform. As a result of the proposal, which would need to become law to take effect, an analyst at financial services firm Janney Montgomery Scott downgraded Wright Express from "buy" to "neutral." Wright Express is a South Portland-based payment processor for commercial and government vehicle fleets. It established its banking subsidiary in Utah in 1998.
"It hasn't been put into anything actionable yet," Jessica Roy, Wright Express' communications manager, told Mainebiz this afternoon. "It's something we're monitoring closely."
If the proposal was put into action, the JMS analyst said Wright Express would appear to have three options: sell Wright Express Financial Services Corp., become a bank holding company and be forced to sell its nonfinancial operations, or convert to a bank holding company and create a new subsidiary to run its nonfinancial activities, according to the Associated Press. All three options have negative implications for its long-term earnings power, the AP reported.
Wright Express is one of 29 companies that would be required to convert to a bank holding company under the Treasury proposal, the AP reported.
Janney Montgomery Scott upgraded Wright Express to "buy" in December 2008.
Mainebiz web partners
Most Recent
Most Recent
Comments